Bloomberg News

Hong Kong Stocks Rise on Report China Manufacturing May Expand

October 24, 2011

Oct. 24 (Bloomberg) -- Hong Kong stocks rose, with the Hang Seng Index set for its third-largest percentage increase this year, after a report showed China’s manufacturing may expand in October for the first time in four months.

Aluminum Corp. of China Ltd., the nation’s No. 1 producer of the metal by market value, jumped 6.4 percent after commodity prices also rallied on Oct. 21. HSBC Holdings Plc, Europe’s biggest bank, gained 3.1 percent as European leaders inched toward a new strategy to contain the region’s debt crisis. Industrial & Commercial Bank of China Ltd. surged 5.8 percent after Barclays Plc said Chinese lenders may report “strong” profit growth in the third quarter.

The Hang Seng Index advanced 4.1 percent to 18,771.82 at the close of trading in Hong Kong. All stocks rose on the 46- member gauge. The year’s biggest single-day percentage increase was on Oct. 6, when the gauge jumped 5.7 percent.

“The concern has been that China is heading for hard landing and this survey, while it tends to be quite volatile, would seem to contradict that,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd. “It suggests that China is in much better shape than many had feared, and that there’s no hard landing in sight.”

Hong Kong’s benchmark gauge fell 2.6 percent last week after China reported its slowest economic growth since 2009 and German officials said there wouldn’t be a quick fix to Europe’s debt crisis. The Hang Seng Index tumbled 14 percent last month.

A preliminary index of purchasing managers in China showed a rebound in new orders and output this month. The reading of 51.1 for the index released by HSBC Holdings Plc and Markit Economics today was the highest in five months. A reading above 50 indicates expansion.

China Manufacturing

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 5.4 percent to 9,717.65 today. The Hang Seng Index has tumbled 19 percent this year amid concern a U.S. recovery is stalling, and as Europe’s leaders grope for ways to maximize the firepower of a European Financial Stability Facility as the debt crisis threatens Italy and Spain.

CSR Corp., a mainland maker of railway equipment, rallied 14 percent to HK$3.75 and China Railway Group Ltd. climbed 11 percent to HK$2.36.

Aluminum Corp. jumped 6.4 percent to HK$3.83. China Coal Energy Co. surged 7.6 percent to HK$8.75 after reporting that third-quarter net income increased 26 percent.

Jiangxi, Zijin

Jiangxi Copper Co., China’s biggest producer of the metal, climbed 11 percent to HK$16.92. Zijin Mining Group Co., China’s biggest gold miner by market value, gained 12 percent to HK$3.10. Cnooc Ltd., the nation’s largest offshore oil producer, added 6.5 percent to HK$13.68.

Hong Kong-listed resources companies also rose after commodity prices climbed on Oct. 21. New York-traded copper futures jumped 5.4 percent, the most in two years, while the London Metal Exchange Index of prices for six metals, including copper and aluminum, gained 4.7 percent. Crude futures rose 1.6 percent on the New York Mercantile Exchange. Oil and copper prices extended gains in trading today.

HSBC gained 3.1 percent to HK$65.05. Esprit Holdings Ltd., a clothier that counts Europe as its biggest market, climbed 2.3 percent to HK$10.76.

European leaders meeting in Brussels at the weekend excluded a forced restructuring of Greece’s debt, sticking with the policy of enticing bondholders to accept “voluntary” losses to help restore the country’s finances. The complete blueprint will be formed Oct. 26.

Futures on the Standard & Poor’s 500 Index were little changed after falling as much as 0.7 percent earlier today. The gauge climbed 1.9 percent on Oct. 21, capping its longest weekly rally since February, as European governments considered deploying $1.3 trillion in funds to tame the crisis.

‘Generally Optimistic’

“The mood is generally optimistic that euro-zone policy makers will announce significant measures to bolster the bailout fund and resolve Greece’s debt crisis, while also supporting the region’s banks,” said Stan Shamu, a strategist at IG Markets in Melbourne. “The tight ranges that markets have been trading in are likely to continue until a resolution is reached.”

ICBC rose 5.8 percent to HK$4.39 and Agricultural Bank of China Ltd. surged 8.1 percent to HK$3.07.

Hong Kong-listed Chinese lenders may post 32 percent profit growth on average in the third quarter, led by China Minsheng Banking Corp., Agricultural Bank and China Citic Bank Corp., according to Barclays analysts. China Minsheng Banking advanced 4.2 percent to HK$6 and China Citic Bank rose 5.4 percent to HK$3.74. China Merchants Bank Co. surged 11 percent to HK$14.60.

“We believe the current share prices may reflect too bearish a scenario for asset quality deterioration,” analysts May Yan and Shujin Chen wrote in a report today. “Negative news flow may have peaked.”

Futures on the Hang Seng Index gained 5 percent to 18,851. The HSI Volatility Index lost 6.8 percent to 35.38, indicating options traders expect a swing of 10 percent in the Hang Seng Index in the next 30 days.

--Editors: Nick Gentle, Jason Clenfield.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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